Biocept, Inc. (NASDAQ:BIOC) shares are down more than -52.50% this year and recently increased 2.04% or $0.01 to settle at $0.33. The Allstate Corporation (NYSE:ALL), on the other hand, is down -7.93% year to date as of 03/13/2018. It currently trades at $96.41 and has returned 3.19% during the past week.
Biocept, Inc. (NASDAQ:BIOC) and The Allstate Corporation (NYSE:ALL) are the two most active stocks in the market based on today’s trading volumes. Investor interest in the two stocks is clearly very high, but which is the better investment? To answer this question, we will compare the two companies across growth, profitability, risk, and valuation metrics, and also examine their analyst ratings and insider activity trends.
The ability to consistently grow earnings at a high compound rate is a defining characteristic of the best companies for long-term investment. Analysts expect BIOC to grow earnings at a 40.00% annual rate over the next 5 years. Comparatively, ALL is expected to grow at a 10.92% annual rate. All else equal, BIOC’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. EBITDA margin of 12.48% for The Allstate Corporation (ALL).
The value of a stock is simply the present value of its future free cash flows. BIOC’s free cash flow (“FCF”) per share for the trailing twelve months was -0.11. Comparatively, ALL’s free cash flow per share was +2.35. On a percent-of-sales basis, BIOC’s free cash flow was -0.22% while ALL converted 2.16% of its revenues into cash flow. This means that, for a given level of sales, ALL is able to generate more free cash flow for investors.
Liquidity and Financial Risk
BIOC’s debt-to-equity ratio is 0.35 versus a D/E of 0.31 for ALL. BIOC is therefore the more solvent of the two companies, and has lower financial risk.
BIOC trades at a P/B of 2.35, and a P/S of 3.77, compared to a forward P/E of 11.13, a P/B of 1.66, and a P/S of 0.88 for ALL. BIOC is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. BIOC is currently priced at a -85.33% to its one-year price target of 2.25. Comparatively, ALL is -8.99% relative to its price target of 105.93. This suggests that BIOC is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.00 for BIOC and 2.50 for ALL, which implies that analysts are more bullish on the outlook for ALL.
Risk and Volatility
Beta is a metric that investors frequently use to analyze a stock’s systematic risk. A beta above 1 implies above average market volatility. Conversely, a stock with a beta below 1 is seen as less risky than the overall market. BIOC has a beta of 1.72 and ALL’s beta is 0.98. ALL’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment.BIOC has a short ratio of 2.57 compared to a short interest of 2.60 for ALL. This implies that the market is currently less bearish on the outlook for BIOC.
The Allstate Corporation (NYSE:ALL) beats Biocept, Inc. (NASDAQ:BIOC) on a total of 8 of the 14 factors compared between the two stocks. ALL is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, ALL is the cheaper of the two stocks on book value and sales basis, Finally, ADI has better sentiment signals based on short interest.